11/10-2018 07:00:26: (NRC) NRC Group ASA acquires VR Track Oy to form the leading rail infrastructure company in the Nordics

NRC Group ASA ("NRC Group") has entered into an agreement for the acquisition of
VR Track Oy ("VR Track"), a Finnish company in the VR Group engaged in the
business of railway construction, maintenance services and design with
operations in Finland and Sweden (the "Transaction").
The key terms of the Transaction are as follows:
· The Transaction will be structured as an acquisition of all shares in VR
Track by a newly established and wholly owned Finnish subsidiary of NRC Group,
from VR Group Oy (registered name VR-Yhtymä Oy) ("VR Group").
· The purchase price is based on an enterprise value of VR Track of EUR 225
million on a cash and debt free basis with normalised working capital.
· 65% of the purchase price shall be paid in cash by NRC Group while the
remaining 35% of the purchase price shall be paid in the form of consideration
shares in NRC Group at an agreed price per consideration share of NOK 75.31. The
share price represents the volume weighted average price of the NRC Group share
on Oslo Børs the last thirty trading days prior to signing. The cash portion of
the purchase price will be fully financed by available cash and new bank debt
facility.
· VR Group will obtain an ownership in NRC Group representing around 18% of
the total number of issued shares in NRC Group following completion of the
Transaction. NRC Group will seek to facilitate representation by VR Group on the
board of directors of NRC Group.
· VR Track estimates to generate approximately EUR 300 million in net sales,
EUR 28 million in EBITDA and incur capex of EUR 4 million in 2018. The majority
of profits are generated in Finland.
· Completion of the Transaction is conditional upon anti-trust approval in
Sweden, certain regulatory approvals in Finland, approval by an extraordinary
general meeting of NRC Group as well as certain other customary closing
conditions.
· The Transaction will be presented at an extraordinary general meeting of NRC
Group, expected to be held early November 2018 (the "EGM"), and a notice of the
EGM is expected to be distributed and published shortly. Approval of the
Transaction requires at least two-thirds majority of the votes cast and of the
share capital represented at the EGM.
· Closing of the Transaction is expected to take place in early January 2019,
subject to satisfaction of the closing conditions.
"We will double in size and significantly strengthen our market position, paving
the way for further steady growth", says Øivind Horpestad, CEO of NRC Group.
Transport infrastructure involving rail is crucial for modern societies to
develop and thrive. All Nordic countries are investing heavily in new railways,
metro and tram connections as part of their efforts to build more
environmentally friendly and sustainable transportation systems. With a broader
operational scope and synergies, the combined company will be in a favourable
position to capitalise on these positive market trends.
"Our two companies are complementary in terms of market position, capacities and
capabilities. We will offer services across the entire value chain, including
design, ground works, track, security, electro, telecom and signalling systems,
and exciting new opportunities will emerge. Furthermore, the combined company
will further strengthen its focus on environmental, social and governance
initiatives (ESG). Both companies are based upon common Nordic values, where a
sustainable and responsible approach to the way we solve our projects and how we
act together with our clients, employees and all other stakeholders, is high on
our agenda", Horpestad explains.
Strategic rationale
The combination of NRC Group and VR Track will create the leading specialized
rail infrastructure company in the Nordics, with strong capabilities across the
entire railway value chain and leading positions in the attractive Norwegian,
Swedish and Finnish markets. NRC Group and VR Track are two complementary
businesses, and the combined operations will be stronger and more competitive
than each company stand-alone. The enlarged NRC Group will be able to leverage
its unique capabilities across borders to create new project opportunities and
offer larger turnkey projects to a wider customer group.
There are significant long-term growth opportunities across all three key
markets on the back of political willingness to upgrade existing infrastructure
and invest in new railways. With a broader operational scope and synergies, the
combined company will be in a favourable position to capitalize on these
positive market trends and further grow the already strong cash flow of both NRC
Group and VR Track's existing operations.
Synergies
The Transaction will create several exciting opportunities for the combined
company, including:
· Stronger ability to capitalize on the trend towards maintenance projects in
both Norway and Sweden on the back of VR Track's extensive experience from such
contracts in Finland and Sweden
· Greater capacity and sufficient machinery to take on more projects
· Increased utilization of VR Track's machine pool
· Stronger platform for growth and better utilization of resources in Sweden
· Leveraging unique capabilities across borders, such as city infrastructure
construction in Finland, design projects in Norway and environmental services in
Sweden and Finland
Overview of the Finnish rail infrastructure market
The Finnish rail infrastructure market exhibits similar characteristics as
Norway and Sweden, with urbanisation, focus on the environment and
sustainability as well as historical underinvestment and maintenance backlog. As
a result, the Finnish market is expected to grow by an average annual growth
rate of 8% from 2017 to 2022.
The framework for rail infrastructure spending is set by parliament over four
-year parliament periods. However, preparatory work has been initiated to
develop 12-year transportation plans similar to Norway and Sweden, which would
provide further visibility on long-term growth prospects.
Key facts about VR Track
VR Track is a private limited liability company (Finnish: osakeyhtiö)
incorporated in Finland, with business ID 1007822-3. VR Track's registered
office and principal place of business is at Radiokatu 3, 00240 Helsinki,
Finland. VR Track owns 100% of the Finnish subsidiary Arcus Oy and the Swedish
subsidiaries VR Track Sweden AB and VR Infrapro AB.
VR Track is wholly owned by VR Group, which in turn is wholly owned by the State
of Finland.
VR Track, including its subsidiaries, currently has approximately 1600
employees. The board of directors of VR Track Oy currently consists of Rolf
Jansson, Ilkka Heiskanen, Marko Hyvärinen and Timo Koskinen, all being
representatives of VR-Group Ltd. A new board of directors of VR Track will be
established in connection with completion of the Transaction
Key financial information for VR Track
The tables below set out selected data from VR Track's audited income statement
and balance sheet for the years ended 31 December 2015, 2016 and 2017, and
management accounts for the last twelve months ended 30 June 2018.
Income statement
The financial performance of VR Track in 2016 was negatively impacted by one-off
losses related to certain projects in Sweden. These loss-making projects have
been terminated.
(in EUR 2015 2016 2017 LTM 2018 2018E
millions)
Net sales
306,6 298,9 306,2 299,7 300,0
EBITDA
23,7 (7,8) 22,9 24,2 28,0
Depreciation
and (5,6) (6,3) (6,1) (6,4) (8,0)
amortisation
EBIT
18,1 (14,1) 16,8 17,8 20,0
Balance sheet
(in EUR millions) 31 Dec-15 31 Dec-16 31 Dec-17 30 Jun-18
Fixed assets 31,6
41,2 33,9 28,9
Inventories 19,6
20,6 15,8 16,2
Receivables 75,3
99,8 86,6 76,0
Cash 17,0
53,1 30,9 31,2
Current assets 173,5 133,3 123,3 111,9
Total assets 214,7 167,2 152,3 143,4
Equity 55,8
88,0 55,5 54,4
Provisions and 3,5
deferred tax 5,5 7,6 4,6
Other long term 0,0
interest bearing 21,8 (0,0) 0,0
debt
Leasing 6,1
liabilities - - -
Intra group loan 8,1
12,9 6,4 7,7
Group contribution 17,4
13,8 17,1 17,4
Trade payables & 52,6
other liabilities 72,7 80,6 68,1
Total equity and 214,7 167,2 152,3 143,4
liabilities
Order book
As of June 30, 2018, VR Track had an order book of EUR 401 million.
Other key information related to the Transaction
No agreements have been or are expected to be entered into with the executive
management or members of the boards of directors of NRC Group or VR Track
entitling them to any special benefits in connection with the Transaction.
NRC Group will publish a document with further information regarding the
Transaction in accordance with the requirements of Oslo Børs' Continuing
Obligations section 3.5. Such document is expected to be published in the second
half of November 2018.
Investor presentation
An investor presentation will be held Friday 12 October 2018 at 09:00 a.m. (CET)
at Arctic Securities offices, Haakon VIIs gt 5, Oslo. The presentation will be
held by NRC Group's CEO Øivind Horpestad and CFO Dag Fladby.
If you wish to attend the presentation, please register by
email to events@arctic.com.
Advisers
Arctic Securities AS acts as financial adviser and Advokatfirmaet Schjødt AS
acts as lead legal adviser to NRC Group in connection with the Transaction.
Nordea Bank AB acts as financial adviser and Krogerus Attorneys Ltd. acts as
lead legal adviser to VR Group in connection with the Transaction.
***
For further information please contact: CEO Øivind Horpestad, telephone: +47 91
00 06 26,
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